GAME over on the High Street?

 
GAME store

Last November Call of Duty: Modern Warfare 3 became the fastest selling entertainment product ever, with excited gamers queuing at High Street stores to pay over £40 for their fix. Spool forward to Monday, and the UK's best known games retailer Game Group has told its investors their shares may be worthless as it struggles to survive. So how do we reconcile these two pieces of news?

First of all, despite the success of blockbusters like Call of Duty, it has been a tough 12 months for the games industry - or at least for those parts of it relying on traditional console games. With no major new console launches - the year was described by Game Group as a "cyclical low point in the industry" - there has been a shortage of reasons for gamers to restock with new titles.

UKIE, the trade body for the UK games industry, described 2011 as "a challenging year for the boxed product video games market" with sales down 7% on the previous year. For High Street retailers like Game, it was probably even more challenging - the UKIE figures include online sales from the likes of Amazon and Play.com, and anecdotal evidence suggests that this is where gamers are directing more of the cash they spend on console games.

And even when a hot new title comes out, High Street shops find that their profit margins are under threat from supermarkets offering cut-price deals. The games industry site MCV quoted one independent firm describing the discounting from supermarkets and online retailers as "serious and suicidal".

But what makes the outlook for any company trying to sell games on the High Street even darker is the fact that the digital revolution is finally sweeping through this industry. The industry has been able to hold on to physical sales for longer than seemed likely, but now digital downloads are gradually taking over, and, just as in the music business, that is leaving casualties behind.

Call of Duty Blockbuster games are money-spinners

From digital distribution platforms like Steam to smartphone apps and social networking games, there are all sorts of new ways for gamers to get access to the industry's products - and at a much lower price than a boxed game. For developers and publishers who learn to adapt, that does not have to be bad news.

Electronic Arts, the giant American games firm, revealed recently that a third of its revenues came from its digital business, boasting that it was now the number one games publisher in the Apple App Store. Other firms are working out that hooking gamers into a lasting relationship with a title that involves buying virtual goods and add-ons may produce more revenue than the original boxed product.

None of this, of course, is much use to a retailer like Game. In May 2008, its share price peaked at £2.96, as the Wii, the XBox 360 and Sony's PlayStation 3 created a booming market for console games. Today, the shares are trading at about 1p - which says the market has recognised that the firm is worth virtually nothing.

In under four years, the idea of popping down to the High Street to buy a new game has become very old-fashioned - although I suspect that Game stores will currently be busy with youngsters spending those gift vouchers they got for Christmas.

What is surprising is that it took so long for such a digital industry to move away from the physical world.

 
Rory Cellan-Jones Article written by Rory Cellan-Jones Rory Cellan-Jones Technology correspondent

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  • rate this
    +2

    Comment number 15.

    Seasurfer1 said: Just another Warning to our Coalition Government that the HIGH STREET is dying rapidly.

    And what do you want them to do, ban the internet? The high street only exists as a mechanism for the seller to reach the consumer. The internet, however impersonal, is doing the same, but more cheaply.

    The high street will re-shape, selling only goods that need to be touched.

  • rate this
    -1

    Comment number 14.

    Using plastic and cardboard to distribute 1s and 0s around the world makes little sense in the days of the internet. Hence the boxed console game market peaked about 4 years ago and its rate of decline has been accelerating fast.
    Meanwhile digitally distributed games are booming. Mobile phone gaming is expanding at 2,000 % pa.

  • rate this
    +2

    Comment number 13.

    11. ioioos

    Spot on. GAME should reinvent themselves pretty sharpish, as a place to PLAY games, not just buy them. Once they've got bums on seats, they can sell 'em food and drink too.

  • rate this
    +4

    Comment number 12.

    Also for those of you complaining about the service, I can tell you that I always try my best to please the customer, and if I ever came across as condescending to those I have served, it's often because they were being stupid/thought I was a magician.

  • rate this
    +3

    Comment number 11.

    Much as I used to love browsing shops for games, CD's and DVD's, the digital world has made traditional retailing simply too expensive. Whilst stores have to pay rent and wages, they will never compete.

    Game, HMV, Zavvi, Virgin, Tower, Waterstones. All dead in the water. They didn't move quick enough with the times.

    High streets need to change from retail to recreational to survive.

  • rate this
    0

    Comment number 10.

    8 jolboy35

    Presumably those without fast broadband will just have to wait for the post to arrive. The internet mail order model (combined with the supermarkets) did most of the damage to the specialist high street music/film/game retailers. Downloads are just the final nail in the coffin.

  • rate this
    0

    Comment number 9.

    This is nothing to do with piracy, cos piracy doesn't cost the industry money, in fact piracy helps industry as pirates spend more money than non-pirates. Or something like that anyway. Roll on with the "outdated business model" rubbish (ie I should be allowed to shoplift *rolls eyes*)

    @Marc - I share your frustration, but all game shops do this now. Very annoying and a desperate claw-back.

  • rate this
    +3

    Comment number 8.

    Its all very well saying that digital distribution is going to take over but not everyone has superfast broadband, many people still have a really poor speed so what are they supposed to do? Supermarkets will only stock a limtied range of games and HMV will soon go under as well so although online stores will fill some of the void left by Game its possible the games industry may be hit hard.

  • rate this
    +1

    Comment number 7.

    If the GAME group goes under, I hope you all like being served by dead eyed suicidal people who know nothing about games in supermarkets and the inevitible price rise on the Internet. I also hope you like the 10,000 people added to the unemployment figure! Rather like TOTP you'll miss it once it's gone.

  • rate this
    0

    Comment number 6.

    another example of the high st not moving with the times - I find it hard to feel sorry for any company who doesn't adapt - like the company complaining that no-one buys their soap any more, it's all shower gel. The high street is dead, and the internet is king.

  • rate this
    +4

    Comment number 5.

    I've got no problem with GAME disappearing, what I will miss is Gamestation. GAME is little more than the gaming section in supermarkets but Gamestation is a proper little haven for geeky gamers. I like going in there, I like buying my games from there and I like the knowledgable or semi-knowledgable staff that comes with it. GAME is Modern Warfare, Gamestation is more Marvel vs Capcom...I think

  • rate this
    -4

    Comment number 4.

    Game are a shameful company, they have pushed 2nd hand games for years even if the customer wanted a brand new copy, purely because they get more money from the transaction, whilst the publishers and developers of said game get zero, they are getting what they deserve, you reap what you sow and all that...(terrible customer service notwithstanding)

  • rate this
    -7

    Comment number 3.

    Just another Warning to our Coalition Government that the HIGH STREET is dying rapidly and that a Costly and major infrastructure Problem is looming.

  • rate this
    0

    Comment number 2.

    Game Over?

  • rate this
    +11

    Comment number 1.

    To be blunt Game have sat back and expected the money to roll in for years. Their prices aren't competitive, their hardware is tied up in bundles people don't want, and their service is nothing to write home about.

    I've been in there a few times over the last few years looking for PC games, they either don't have them in stock or they are charging full price for games that are 2+ years old!

 

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